tv Bloomberg Markets Americas Bloomberg January 12, 2018 12:00pm-12:30pm EST
speaking in geneva, robert resident'sid the comments "go against the universal values the world has been striving so hard to establish since world war ii and the holocaust." >> shameful comments from the president of the united states -- i'm sorry, but there is no other word one can use but racist. >> the president denies that he used foul language and says anything derogatory about haiti. the same russian hackers who penetrated the democrat party have spent the last few months laying the groundwork for an espionage campaign against the u.s. senate, according to the cybersecurity firm trend micro, saying -- nicknamed fancy bare is trying together the emails of america's political elite, looking for confidential information to leak. food shortages in venezuela
that have left three people dead and 16 injured. -- ofesident of the cattle ranchers says at least two farms were attacked by mobs of people who slaughtered cows. a mobo on twitter showing attacking -- with a machete. months of political stalemate according to people familiar with discussions -- angela merkel and the social democratic party as a tentative plan to form a new government. it includes more government involvement in education and changes to health insurance, but no tax hikes. global news, 24 hours a day. powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark, this is bloomberg. >> it is noon in new york, 5:00 p.m. in london, and 1:00 a.m. in hong kong. welcome to bloomberg markets.
shery: from bloomberg world headquarters in new york, these are the top stories. the two-year treasury yield topped 2% for the first time since 2008. we will speak with oppenheimer funds cio krishna memani in minutes. earnings season kicks off with mixed results. jpmorgan and wells fargo's reports. facebook shares down after announcing big changes to the website. mark zuckerberg says it could cause user engagement to fall. abigail doolittle is with us as we are halfway into the trading day and stocks reach record highs yet again. >> the rally simply continues this year. take a look at the s&p 500, dow,
nasdaq. major averages up more than half a percent, the dow up more than .8%. continued optimism about the effects of tax reform as earnings season gets underway. earnings on a year-over-year basis will grow 11.8%. it seems investors are feeling good about the current situation . as we have weekly gains, the best since last week, two solid weeks in a row. the dow almost 2% on the week. lots of bullish momentum. -- fromke a look at the a point and percentage standpoint. biggestp top 1.8%, the boost for the s&p 500. this as suntrust has raised its , saying $1400 per share shares are fundamentally very
attractive. microsoft also higher up. one of the top boosts as bullish comments saying pc shipments have positive readthrough's for microsoft. as for the percentage performers, take a look at the retail space. up, jpmorgan changed to overweight. the stabilization of bricks and mortar among other factors. target up 3.6%, having a banner year on the holiday season. turn to two social media giants. here is a tale of two stories. as the company% announced changes geared towards ,rioritizing friends and family away from brands, businesses, and media. mark zuckerberg said this could take away from engagement, although the time spent on the
website will be more valuable. investors are not liking it today. twitter perhaps getting a bump from that news, up 3.7%. -- raising their price target to 30. it's interesting what mark zuckerberg did say about facebook. we are going to see that utilization trends to some degree have been stable or flatlining for some time. this is g #btv. thank you so much. we are going to talk more about facebook later in the show. also action in the bond market. the u.s. two-year topping at key levels for the first time since the financial crisis, above -- right at 2%. court acceleration -- above 2% briefly without coming back down to two. an expected fed rate hike in
march. up now, chris shut -- krishna memani. anticipated and of the bond bull market finally here? like it iseems happening not with a bang but with a whimper. >> so, i think the death of the bond market has been talked about for a long time, and i think it is an exaggerated statement. tohink for the bond market have the debacle that everyone yous to be for telling, have to have inflation to meaningfully higher than what it has so far. additionally, global savings have to come down. the structural issues that have kept rates low from a global standpoint have to go. i don't think any of that is going to happen. the other day, we heard the chinese were not going to buy treasuries anymore.
i kind of have a great deal of difficulty with that. widen, going to exporting stuff to the u.s.. somebody would have to buy it, whether the chinese or someone else. at the end of the day, we think rates are well anchored, and that doesn't mean that given global growth environment, things could go up. it could. but the end of the bond market is an exaggeration. with the fed rate hike, you are seeing the two-year yield at the highest level since 2008. the chart also showing you that. onn it comes to the yields the s&p 500, they might be at the same level. does this take the case away from further stock market rallies, especially given we've seen them so much? >> i think the fed is tightening, of course, given the pace of global growth and u.s. growth, especially given the tax driven tailwind.
i think the fed is probably going to do somewhere between three or four rate tightening's today. the curve will continue to flatten and the policy rates are going up. whether that needs to be the end of the bond market, whether that leads to 10 years and 30 year rates getting unanchored, i think that is the question. we expect the fed to tighten. -- but i think for the equity market, the fact that you have enough growth and profitability and tax driven benefit to earnings, i think equities continue to do well. pcse: i know one of your going into the year -- i know be thatour theses will -- will be more than developing market growth. do you think -- will be more attractive as we see a pullback in u.s. debt? >> emerging-market debt i think
is attractive, probably the best asset class in credit in our view. that is driven by yields in the emerging markets, driven by our expectations that the dollar will remain stable or continue to weaken. so that you can get those yields back to the u.s. in dollar terms. we believe emerging-market debt is very attractive and the best asset class in spread fixed income. shery: the problem lies with the dollar. it keeps weakening. it is near september lows. what happens if we get tax more investments, and the dollar overshoots? especially as we don't know what is going to happen once the fed continues to unwind its balance sheet. >> i think for the dollar to get unanchored from its current thinkon, i
emerging-market growth has to become suspect in some way, or we have to get into one of those geopolitical things, whether it is nafta, north korea. overseeingthat, economies have a great -- overseas economies have a great deal of growth. u.s. growth will start slowing down in the second half, relatively speaking, still robust. at the end of the day, i think our expectation is the dollar will continue to remain stable or weaken some. if not, i think the case for equities in general and emerging-market equities in particular, become somewhat suspect. >> one of the other interesting is that we will continue to see the trend of growth stocks outperforming in the u.s. that is not necessarily a call that everyone has at this point. ,his has more interesting value
in fits and starts where we see more rotation into it. why do you think -- >> i think the case for value is not a bad one. valuations and value, kind of an odd statement to make. they are quite attractive relative to growth because growth has had one heck of a rally over the last few years. the challenge is it is still a growth-short world. as long as those growthy companies can deliver earnings growth, i think we are willing and able to pay those fancy premiums that we have to pay for them. i think the case for values getting better -- but i think for value to outperform growth in a meaningful way and on a sustained basis, i think we have to see some sign of inflation coming back, some sign of rates asing meaningfully again on
sustained basis. until we see that, i have difficulty seeing value doing better than growth. shery: thank you so much, krishna memani, for joining us, oppenheimer funds cio. bank earnings season kicks off with a whimper. jpmorgan reports a 26% drop in trade and revenue. wells fargo -- due to ongoing litigation costs. ♪
while wells fargo's earnings took another big hit from litigation. next week, we will hear from citigroup, jpmorgan -- citigroup, jpmorgan stanley. jason goldberg- from barclays. give us some insights into what you saw today. any surprises when it comes to these banks? if yourally speaking, adjust for all the tax related noise, and there was a lot of noise in the quarter on gains and charges, results pretty much in line with expectations. long growth a little better this -- upr than last quarter, modestly. trends we felt were mixed. trading revenues were down, not a huge surprise.
-- credit remains benign given the economic backdrop. shery: one of the things i've been watching is that net interest margins in most cases have begun to expand even as the curve yield has flattened out. contracted. does that mean jpmorgan has more pricing power in a way? what is the difference in how they are managing this? hadf you look, wells fargo -- given the tax change -- there margin was up two to three basis points. similarly, both companies saw a deposit cost increase 2% to 3%. in any quarter, it is hard to compare two banks.
at this point, the banks are more leverage on the short end of the curve them the long end, and if it continues to hike, they should see income growth. some point, our customers going to demand higher rates? >> we'll see. with each successive hike, you see -- increase. you see deposit costs go up. the fed didn't hike in quarter for until the bottom few weeks. if we think about 2018 overall, we think -- this year than last year. not pastfargo still its consumer banking scandals. when can we expect them to stop suffering from ongoing problems? >> it's month 15 since all of this stuff came to life -- came to light.
they cometer it seems closer to changing personnel, business practices. this quarter had a sizable tax gain and we think they used that to the back and build their legal reserves. we think it is behind them from eight legal and consulting cost perspective. they need to improve revenue momentum. speaking of that momentum, mortgage banking fees in wells fargo down 35%. residential origination down a bit. does that meet your expectations? seasonally, quarter four is -- slowdown, refinance activity has played itself out. margins heldok -- relatively stable. frankly, smaller business today than several years ago. when it comes to
jpmorgan, their equities trading business got burned. are we expecting other banks to get hit? >> they certainly weren't the only ones with exposure to them, another factor to watch this quarter. i think goldman sachs mentioned citigroup and bank of america have exposure. asy may have a one-off event we see additional earnings next week. julie: to come back to the issue of taxes, banks have talked costs associated with taxes. what are your estimates for the full year as to how much taxes could add to their earnings? not just in terms of the corporate cut, but income tax cuts for customers. purely the reduction in the corporate tax rate could net increased expenses, whether it contributions,me
increased minimum wages, one-time bonuses. the net positive is anywhere from attend a 15% increase in terms of what the -- from a 10% to 15% increase. -- does that result in higher loan growth, increased capital markets revenues? there has been a lot of positive rhetoric around that, but it is too early to tell how it translates into revenue lines. julie: thank you for your time. let's go ahead -- shares of facebook are following since they announced major changes to the newsfeed. possible long-term impacts of that move. this is bloomberg. ♪
changes to its social network. mark zuckerberg announced that usersmpany will shift news feeds back towards posts from friends and family and away from businesses and media outlets. a move that could mean people spend less time on the site. wang.g us is selina this one post from zuckerberg could be very costly. apparently, his personal fortune billion on this friday. why did he do this? >> that is precisely correct. his posts and to have that effect. what he is saying is he wants to bring facebook back to its roots. the newsfeed has exploded with advertisements and branded content, and he wants to bring it back to being a social network. changeans they will their algorithm so it prioritizes posts that sparked
engagement and back-and-forth conversation. react seeing shares negatively because the implication is it means less engagement. he said that himself in the post. less engagement means fewer impressions, and that could mean a lower ad load. on the flipside, pricing could increase, the type of content that these brands and businesses put in front of users need to be more creative to spark that sort of interaction. in the short term, the concern is this could have a negative impact on revenue. can connect the dots for me. we've been talking about this all day, saying it is going to reduce time. we've come back to this a couple times -- the goal is to make acebook feel less like depressing cesspool. why would that decrease user engagement? if one of the goals is to make facebook less negative in a way,
with all of this news interaction, why would that not increase user engagement on facebook? why is the thinking that it will decrease? >> i want to step back and look at the broader picture. mark zuckerberg is not just making a feel-good decision, he is making a business decision. over the past two quarters, engagement on facebook has decreased, because as some say ofhas become a negative pool russian manipulation. zuckerberg realized this puts facebook in an enormous euro crisis. -- and or miss pr -- neormous pr crisis. this could term, establish a stronger relationship between facebook and users. we have seen consumers again to distrust social media platforms. all of the revelations of manipulation and dissemination of propaganda.
it is about bringing that back. this could also improve the perception with advertisers, and may want them to switch their ad dollars to a trusted platform. smallspeak to a few inside businesses. a startup said he is very upset -- most of his at dollars are on facebook, and because of this deep prioritization, he thinks making content is not worth his time. julie: coming up, bloomberg real yield is next. 12:30 new york, this is bloomberg.
jonathan: from new york city, i'm jonathan ferro. 30 minute dedicated to fixed income, this is "real yield." core inflation accelerates, two-year treasury jumped 2% for the first time since 2008. some of the world so must want on investors say the bull market and bonds is over. credit investors are not showing any nerves. john bonds in the largest inflows in over a year. we begin with a shakeup in the global bond market. be in a jagged period, the first quarter. >>